Video Commentary: Is Turkey facing another currency crisis?
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Erdoğan made a historic mistake by ordering the arrest of İmamoğlu, losing a significant amount of political capital. Since that day, polls have shown the AKP trailing behind the CHP, with 60–65% of respondents opposing İmamoğlu’s removal by fraudulent means. Street protests erupted to protest Erdogan, wtih CHP declaring war on him. Erdoğan’s historic miscalculation also dropped a ticking time bomb in the lap of the Central Bank of Turkey (CBRT). Since then, CBRT’s net reserves have shrunk by approximately $40 billion.
This is capital flight AND flight to safety which if continued could exhaust Central Bank’s reserves, triggering yet another currency crisis.
But, how likely is this? Granting political shocks will continue to upset sentiment, the video explains the pain of keeping FX assets by domestics, as well as the role of monetary policy.
